As you approach retirement, there are several steps you should take to be fully ready. Make sure important documents like your retirement plan, life insurance policy, and will are up to date with beneficiaries and other information.
Your fifties should be a time in which you can enjoy the fruits of your labor, but you also need to protect your assets and figure out what you want to do with your life in the coming years. Here are some tasks everyone should work through in their fifties.
- Know what you need to save. The expenses you face in your fifties might give you an idea of the expenses you’ll face in retirement. Itemize your current expenses and use this as a way to to predict your financial situation down the road. Note any expenses that might change—for example, no longer be financially supporting children, paying off a mortgage or other loan—and factor these into a new budget. Next, use this number to compare against the amount of income you expect to have in retirement. The Social Security website has a calculator that will give you the most recent estimate of your retirement benefits. Finally, use your retirement plan provider’s online budget tools to see how much income you will receive from your pension and benefits. In an ideal situation, any fixed income (from pensions or annuities) and your Social Security benefits should cover basic expenses like housing, food, and utilities. If the number you calculated using online tools is lower than you hoped, you still have time to adjust and contribute to your savings.
- Adjust retirement savings. Your estimate of necessary retirement savings will probably change many times throughout your life. However, having a specific financial goal for retirement might motivate you to ramp up your savings as you get ready to retire. Once you turn 50, you become eligible to make catch-up contributions of an extra $1,000 to your IRA and an extra $6,000 to your 401(k). Even if you can’t put the maximum amount toward your retirement accounts, saving as much as you can is still better than saving nothing. At the very least, retirement savings are pre-tax deductions, so they will reduce your tax bill and boost retirement income. People who invest 15 percent of their pay in their 401(k) can save 2.25 times their salary in 15 years. This amount can grow even higher if you decide to invest your savings.
- Don’t be conservative. Because interest rates are low, it’s difficult to grow savings in conservative investments like bonds, or certificates of deposits. Staying invested in stocks gives your investments more time to grow. Instead of completely scaling back your stock exposure, consider a balanced approach and transition to a portfolio with equal parts stocks and bonds. Life expectancy is growing, so depending on how far away your retirement is, you could have a 20 or 30 year investment horizon ahead of you.
- Make plans for care. If you’re close to retirement, your parents are probably there already. Now is the time to have difficult but necessary conversations, such as how they will prefer to be cared for if they are unable to care for themselves. Asking about their plans and finances, whether they have care or disability insurance, and how much they have in their savings can help you assess which responsibilities you will take on for them in the future. It can also help you determine your own care plans for the future and figure out what you’ll need to save. If you find yourself in the position of caring for your parents, it may seem necessary to leave the workforce. But consider all options; leaving the workforce may have negative consequences and prevent you from reaching your retirement savings goals. Be sure to research part time care options through local providers and any state or federal assistance your parents may be afforded.
- Look into care insurance. The unfortunate thing about unexpected health issues is that they are unexpected and therefore impossible to predict. Though measures like a healthy diet and exercise can prevent some issues, long-term care insurance can help pay for assisted living costs or at-home health care if other health issues crop up. The cost of long-term care insurance varies, but on average costs a married couple anywhere from $2,000 to $5,000 a year. Middle class retirees without care insurance may find that care costs outpace their retirement savings and they don’t qualify Medicaid or state assistance, making it an investment to seriously consider.
- Assess your insurance needs. The National Association of Personal Finance Advisors recommends buying long-term disability coverage. This type of insurance helps to pay for living expenses like housing, utilities, and food if the policyholder was ever unable to work due to a disability. This coverage may prevent the need to withdraw from retirement savings early. This might also be a good time to consider your life insurance policy, which covers living expenses for your loved ones in the case of an unexpected loss.
- Plan ahead. If you don’t know what your retirement will involve in the way of activities or social plans, you still have plenty of time to figure that out. However, if you’re thinking of using your newfound retirement to open your own business, freelance, or learn new skills, now may be the time to start setting aside extra cash while you have it. Saving more now can offset the lessened savings in retirement. If your future plans include transitioning into a position that requires training, it’s likely worth looking into taking classes early, firstly because classes cost money (and your disposable income now can help cover that) and secondly because you’ll have the certification by the time you’re ready to transition.
Doing your research can help you feel more ready and prepared for retirement. Organizations such as Encore.org and RetirementJobs.com can help you transition into new jobs or phases of life and have your plans in place.